Key Points

"Global growth is forecast at roughly 3 per cent over the medium term - down from 3.7 per cent pre-pandemic. Global growth patterns have been changing over the years, notably with China decelerating steadily while India develops into a key growth engine," the IMF chief said.

Georgieva's comments came ahead of next week's annual meeting of finance ministers and central bank governors with the World Bank and the IMF in Washington.

Georgieva said that countries have put in place decisive economic policies, the private sector has adapted and the US tariff turmoil has proved less severe than initially feared.

However, she said it was too early to heave a big sigh of relief, because "global resilience has not yet been fully tested. And there are worrying signs the test may come".

"All signs point to a world economy that has generally withstood acute strains from multiple shocks," Georgieva said, pointing to "improved policy fundamentals," the adaptability of the private sector, lower-than-expected tariffs, and supportive financial conditions.

She noted that the US tariff rate has fallen from 23 per cent in April to 17.5 per cent today, while the US effective tariff rate of around 10 per cent remains "far above" the rest of the world.

But, she warned, the full effect of those tariffs "is still to unfold," adding that the resilience of the world economy has yet to be "fully tested."

Meanwhile, the World Bank on Tuesday raised India's growth forecast for FY26 to 6.5 per cent from 6.3 per cent. India's GDP growth accelerated to a five-quarter high of 7.8 per cent in the April-June quarter.

The RBI has raised its projection of India's GDP growth rate to 6.8 per cent for 2025-26 from 6.5 per cent earlier, as the implementation of several growth-inducing structural reforms, including streamlining of GST are expected to offset some of the adverse effects of the external headwinds, Reserve Bank Governor Sanjay Malhotra said last week.

He pointed out that India's GDP recorded a robust growth of 7.8 per cent in Q1:2025-26 driven by strong private consumption and fixed investment, On the supply side, growth in gross value added (GVA) at 7.6 per cent was led by a revival in manufacturing and steady expansion in services.

Available high frequency indicators suggest that economic activity continues to remain resilient. Rural demand remains strong, riding on a good monsoon and robust agriculture activity, while urban demand is showing a gradual revival, the RBI Governor added.

- IANS